Golden age fades for analysts

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Wall Street analysts, the high-rolling share tipsters who found
fame and fortune during the internet boom, have seen their pay
slashed following an industry backlash.

Although bankers and traders are celebrating high annual bonuses
thanks to a boom in the financial sector last year, analysts are
increasingly looking like poor cousins.

According to research by Whitney Group, a firm of New York
headhunters, the pay of a senior share analyst on Wall Street has
halved from $US1.5 million ($1.97 million) a year in the glory year
of 1999.

Back then, analysts who claimed to understand telecom or
internet companies were in high demand, both at banks and by the
media.

They could also earn multimillion-dollar bonuses for bringing in
deals to the investment bankers with whom they had strong ties.

After New York attorney-general Eliot Spitzer accused top
analysts of issuing fraudulent research that was biased in favour
of clients, Wall Street agreed to new rules that separated their
deal-making and share-tipping arms.

Analysts have since been barred from working on mergers and are
advised to keep careful records of every conversation with banking
colleagues.

Once a source of revenue for banks and therefore highly valued,
analysts are now regarded as being unable to pay their way.

Manny Goldman, a veteran analyst for Sanford Bernstein and Paine
Webber, said: "The golden age for analysts is over. It's not much
fun any more."

When Wall Street collectively paid $US1.4 billion to settle
allegations that its share tips were biased and agreed to strong
walls between analysts and bankers, the industry hoped it would
lead to higher quality research.

Instead it seems that big banks are simply producing less
research.

According to Sanford Bernstein, the budget for share analysis at
the seven biggest stockbrokers fell 40 per cent to $US1.5 billion
last year. Many analysts were fired and not replaced.

During the dotcom boom, Henry Blodget of Merrill Lynch and Mary
Meeker of Morgan Stanley became the king and queen of the internet
with bullish tips predicting huge success for Amazon.com and
others.

Mr Blodget was fined $US4 million and barred from the
stockbroking industry after it emerged that he had privately
derided shares he was punting to the public. He has since tried
journalism.

Ms Meeker is still at Morgan Stanley and still issuing research
reports, but her profile is low.

Jack Grubman, perhaps the most famous analyst ever, was fined
$US15 million and banned from the industry after being accused by
Mr Spitzer of fraud.

He did not admit or deny wrongdoing.

A former stockmarket tipster called Thom Calandra is to pay
$US540,000 to settle charges that he profited from selling shares
he had tipped in his newsletter.